Baldwin Park looks to borrow money to pay for employee pensions

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Since firing Baldwin Park Police Chief David Salcedo in April of 2017, the City Council has not been able to agree on a new chief of police. The Baldwin Park, Calif. City Hall, which houses the Police Department, is pictured October 24, 2017. (Photo by Leo Jarzomb, SGV Tribune/ SCNG)

While other cities in the San Gabriel Valley are looking to sales tax increases to help pay for rapidly accruing employee retirements, Baldwin Park wants to issue $55 million in pension liability bonds.

The City Council voted unanimously Wednesday to direct City Attorney Robert Tafoya to seek “judicial validation” and to accept a proposal from Ramirez & Co. for underwriting services. The city has to get permission from the Los Angeles County Superior Court before it can issue the bonds.

Once the bonds are granted, the money would go directly to the California Public Employees’ Retirement System and could not be used for any other purpose, according to a city staff report. The city’s total unfunded pension liability was about $54.2 million as of June 30, according to the report.

The move exchanges one financial obligation for another at a lower interest rate, city Finance Director Rose Tam said. The annual bond payments will be smaller than what Baldwin Park sends to CalPERS, ultimately saving the city money.

The debt service is expected to be paid off by 2044, with the city spending $86 million at that point when interest is included, Tam said. However, without the bonds, the estimated pension payments the city would make through that period would total $108.2 million, so the city expects to save $22.2 million, Tam said.

City CEO Shannon Yauchzee said those savings would be used to help cover post-retirement health benefits. The city has yet to fund any of the $40 million liability for those benefits but would like to fund between 60 and 80 percent of it, Yauchzee said.

“This decision makes sense to me because of the savings,” Councilwoman Monica Garcia said. “We had plans to pay down our unfunded (other post-employment benefits) liability, and this puts us in a better position to do that.”

Garcia pointed out other cities are scrambling to deal with unfunded pension liabilities.

Last month, the city councils of both Covina and Pasadena voted to place sales tax increases on the November ballot. If passed, the sales tax rate in both cities would increase from 9.5 percent to 10.25 percent.

The West Covina City Council last week voted against placing a special parcel tax on the November ballot. The tax would have helped pay public safety costs, including firefighter and police officer pensions.

Christopher Yee is a reporter for the Pasadena Star-News and San Gabriel Valley Tribune covering cities in the west and central parts of the San Gabriel Valley. He grew up in Monterey Park and studied journalism at East Los Angeles College and UC Berkeley. You may find him at Dodger Stadium or at the Staples Center for L.A. Kings games.